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Mrs Bectors Food IPO Review and Analysis in Detail

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Basis Structure of Mrs Bectors Food IPO

Mrs Bectors Food Specialities is gearing up to bring its IPO to the market. This IPO will hit the markets on December 15, and it will remain open for subscription till December 17.

Sized at Rs. 540.50 crores this offering will be of the book-building nature. This means the share prices are going to be quoted with a price band, and not a single value.

This IPO will contain both a fresh issue segment and an offer for sale segment.

The fresh issue segment includes those shares which are being newly diluted by the company. All the proceeds from the sale of freshly issued equity shares are credited directly to the company itself.

In this case, the proceeds from the fresh issue segment are going to be used to finance the company’s expansion project in Rajpura.

The offer for sale segment comprises those shares which are not being freshly diluted by the company. These shares are sold directly by existing shareholders, and any proceeds are credited to them.

The company does not receive any of the proceeds from the offer for sale segment.

It is interesting to note that this is the second attempt by Mrs Bectors to bring an IPO to the market. The first attempt was in 2018.

The expected market capitalisation will be in the region of Rs. 1,700 crores.

The table below summarises all the details about the Mrs Bectors Food IPO. Details such as the Mrs Bectors Food IPO price, Mrs Bectors Food IPO date, Mrs Bectors IPO lot size, Mrs Bectors IPO listing date, etc. have been included.

IPO description

About the Company

After subscription, the shares of Mrs Bectors Food will be listed on both NSE and BSE.

Mrs Bectors Food Specialities was incorporated in 1995.

Over the years, the company has built up a strong and established presence in the northern part of India.

Mrs Bectors manufactures all its products in one of its six manufacturing units across the country.

Products & Services

Mrs Bectors Food’s products can be divided into three categories, namely, biscuits, bread, institutional (QSR supply) requirements.

Among biscuits, Mrs Bectors Cremica is a household name in northern India. In 2020, 59.20% of the revenue from operations in 2020 came from the sale of biscuits.

Mrs Bectors Food’s bread brand is called English Oven. In 2020, 21.08% of the operational revenue came from the sale of English Oven.

The third segment includes products like bread buns and other smaller products that Mrs Bectors supplies to leading QSR chains like Burger King, Subway and others. This made up 16.84% of the operating revenue in 2020.

Customers

Mrs Bectors Food’s business model has both a B2B and a B2C segment.

The B2C segment comprises the retail customer base across the 26 states in India.

The B2B segment comprises the institutional customers like QSR chains as well as export arrangements in 64 countries.

Management Shareholding Pattern

Mrs Bectors Food is promoted by Anoop Bector.

The table below lists out the details of the major shareholders of the company prior to the Mrs Bectors Food IPO.

Management Shareholding Pattern

Financial Overview

The table below summarises the key financials for Mrs Bectors Food from 2017 to 2020. All the figures are stated in Rs. Crores.

Financial Overview

This growth rate is not very impressive if you consider the fact that the overall packaged foods industry grew at the rate of 10% during that same period. As we can see here, the total revenue of the company has shown a CAGR of 4.31% from 2017 to 2020.

Total Revenue

The net profit earned by the company over the years has been fluctuating. It does not show a steady rise.

Another notable point here is the fact that the long-term debt burden of Mrs Bectors has grown over the years.

From Rs. 35.67 crores in 2017 to Rs. 85.65 crores in 2020, it has shown a CAGR of 24.84%.

Long term Debt

This is a very worrisome fact, indeed, as the long-term debt creates an undeletable strain on the company’s balance sheet.

Industry Overview

The size of the packaged food market in India is in the region of Rs. 1,63,600 crores.

Growth in packaged food industry

The expected growth rate in the industry is about 10.4% from 2020 to 2025.

The overall market has been experiencing sustained growth owing to the changing needs of the young population, the fact that people now have less time to devote to culinary activities, and the gradual expansion in the modern retail sector.

Owing to the COVID-19 lockdown, several packaged food companies experienced surges in their revenue in the first quarter of FY 2021.

The revenue earned by Mrs Bectors increased by 34% in this quarter alone.

The overall market includes a number of sub-categories like biscuits and bakery, pasta and noodles, savoury snacks, confectionary and more.

Out of that, Mrs Bectors operates in the sub-category of biscuits and bakery.

Market Split-up

The overall sub-category of biscuits and bakery in the Indian packaged foods industry is valued at Rs. 45,000 crores. This segment is expected to grow at 9% till 2025.

Now, coming to the market for biscuits in India, this is dominated by large companies who have a well-recognised brand.

Out of that, Mrs Bectors’ Cremica services about 1% of the market.

Market Share in Biscuits

This sub-category is subject to high competition, and the majority of the market share lies with leading brands like Britannia, ParleG and ITC. 66% of the market share lies with these three companies.

Another point to note here is that because this market offers free entry and exit, there are also a large number of local and small-scale companies which keep entering.

This means, there is high competition for market share.

Now we come to the market for bread and bread-based products in India.

This market is currently sized at Rs. 5,000 crores and is expected to grow at a rate of 9%.

Here, there is the presence of both branded and unbranded companies. About 55% of the market is captured by branded companies and smaller local producers service the rest.

Mrs Bectors’ English Oven has a significant presence in the northern and western sides of the country.

Market Share in Bread

The other segment of Mrs Bectors business operations deals with the supply of bread and dough-based products to leading QSR restaurants like Domino’s, McDonald’s, Café Coffee Day, Subway and Burger King.

This industry is mainly occupied by the in-house sections of the QSR chains.

Apart from that, Baker’s Circle and Mrs Bectors emerges as a key player.

Mrs Bectors is the largest supplier for burger chains like McDonald’s, KFC and Burger King.

Market Share in Processed Dough

Here, Mrs Bectors services about 11% of the market.

Mrs Bectors also deals in the supply of frozen desserts to QSR and cafes. This sub-segment, too, is mostly populated by the in-house production facilities of the major QSR chains.

Market Share in Frozen Desserts

Mrs Bector supplies about 1% of the market.

Peer Review

The table below compares the key financial parameters of Mrs Bectors Food with its listed peers.

Peer Review

In comparison, Mrs Bectors’ performance does not look as impressive. It is lagging behind its peers on most parameters. As we can see here, Brittania is the market leader in this segment.

In the market for biscuits and bread-based products, we find the presence of intense competition. The market is largely dominated by household names like Britannia and ParleG.

Apart from that, there are no barriers to entry, and newer firms keep cropping up on the horizon.

This means, in order to make a sustainable presence, the company will require a significant competitive edge.

In the case of Mrs Bectors, this competitive edge currently manifests in the form of its customer support in Burger King and other QSR chains.

Mrs Bectors is currently Burger King’s largest supplier of bread buns.

Strengths of Mrs Bectors Food IPO

Among strengths is the fact that Mrs Bectors Food has an established presence, both in the domestic and export markets. In 2020, over 20% of its operational revenue came from the export of biscuits.

Another competitive strength is the fact that Mrs Bectors Food is the leading supplier of bread buns to Burger King, KFC, McDonald’s and other QSR chains.

Weaknesses of Mrs Bectors Food IPO

Mrs Bectors Food does not have any long-term contracts with suppliers of raw materials.

This means Mrs Bectors has to pay the market price for procuring the items. Market rates keep fluctuating and this will have an adverse impact on the budgeting process of the company and drive up its expenditure.

A second weakness is the fact that the company is involved in a number of tax proceedings. The total amount involved is Rs. 6.37 crores.

Mrs Bectors has quite a sizeable debt burden. The long-term debt burden is at Rs. 85.65 crores. The total amount due is Rs. 122.14 crores.

The promoter of the company, Anoop Bector, has vested interests in some of the group companies, namely CAFL and MBCDPL. This serves as a conflict of interest for Mrs Bectors.

Apart from that, the primary strength for Mrs Bectors, the fact that it has QSR customers, is also a major weakness.

This is because the company does not have any long-term relationships with these customers – the demand arises on a day-to-day basis. This means, there is no assurance that Mrs Bectors will be able to supply Burger King and the others in future.

Valuation of Mrs Bectors Food IPO

The table below compares the key valuation parameters of Mrs Bectors Food with its other listed competitors.

Valuation

A commonly used valuation metric is the price to earnings ratio. The company’s P/E ratio is compared with the industry average. As we can see, with the expected market capitalisation of Mrs Bectors Food, it will be quite a small company in comparison to Britannia and ITC.

If the company’s P/E ratio is lower than the industry average, then it is considered to be undervalued. On the other hand, if it is higher, then it is considered to be overvalued.

In this case, the average P/E ratio for the industry is 74.42.

As for Mrs Bectors, the P/E ratio is 58.42. This means the company is considered to be undervalued.

Thus, we see that Mrs Bectors Food IPO is considered to be undervalued by the market. However, do keep in mind the weaknesses associated with the company.

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Frequently Asked Questions

1. What is Mrs Bectors Food IPO?

Mrs Bectors Food IPO is the Rs. 540.50 crores offer through which Mrs Bectors Food shares are going to be available for sale to retail and institutional investors in the Indian share market.

2. How to apply in Mrs Bectors Food IPO through Zerodha?

To apply for the Mrs Bectors Food IPO, simply log into your account on the Zerodha app. Go to the list of IPOs, select Mrs Bectors Food and place your order.

3. When Mrs Bectors Food IPO will open?

Mrs Bectors Food IPO will open for subscription on December 15. It will remain open for subscription till December 17.

4. What is the lot size of Mrs Bectors Food IPO?

For the Mrs Bectors Food IPO, each lot will contain 50 shares.

5. How to apply for Mrs Bectors Food IPO?

You can apply for the Mrs Bectors Food IPO very easily. It will be available for subscription through the big broking houses and firms in India.

6. When Mrs Bectors Food IPO allotment?

The shares of Mrs Bectors Food IPO will be allotted on December 22.

7. When is Mrs Bectors Food IPO listing date?

The shares of Mrs Bectors Food IPO will be listed on the NSE and BSE on December 28.

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